A trust is an arrangement where a person (Settlor) transfers assets to selected persons (Trustees) to be held for the benefit of persons named by the Settlor (Beneficiaries).
A trust is usually established by way of a trust deed but can be created by less formal means. Once the trust is created, the Settlor loses legal ownership of the transferred assets. The Trustees become the legal owner(s) of the trust assets.
The Trustees have a duty of the utmost good faith to both the Settlor and the Beneficiaries and to deal with the trust assets in line with the terms of the trust together with the Trustee Act 1956.
The Beneficiaries are the only people entitled to benefit from the trust’s assets. Any person (including corporate persons such as companies) can be a beneficiary of a trust, whether that person is alive or unborn. A Settlor may appoint themselves as a Beneficiary.
When establishing a trust, it is vital that the Settlor considers who he or she will appoint as the Trustees and Beneficiaries. To do so, it is important to understand the roles, responsibilities and rights of each participant in the trust and to take advice from experts. Call our Personal Planning and Business Solutions team to find out more about how a trust works and if it’s the right option for you.